If I may dust off the cobwebs quickly, I'd like to explore an idea that's been bouncing around my head for a bit. This may take a few posts to sort out in full.
Democrats and Republicans both love freedom, and both claim it as one of their core principles and driving forces. And yet, from this same starting point, people from both ideological camps tend to draw radically different conclusions. How can this be? It all comes down to negative liberty vs positive liberty -- or, to tack a preposition to that favorite word, freedom from vs freedom to.
In economics, conservatives tend to worry about the freedom to conduct businesses as they please, while liberals worry about freedom from corporations' decisions. This dichotomy comes up in debates about all sorts of regulations: freedom to run polluting businesses vs freedom from living with pollution; freedom to invest at will vs freedom from those investments bringing down the economy; freedom to buy political ads vs freedom from corporations dictating public discourse.
Freedom's prepositions are frequently at odds with each other. A few years ago, an entry at The Economist's Democracy in America blog pointed out that corporate regulations can increase personal freedom if a company is deprived of its right to pollute and a citizen can therefore exercise his right to swim in a river. The argument there was focused on "nanny-state" regulations, like not being able to swim in a pond where one might drown, and the distinction was that an individual can easily assess the risk of downing, but can't easily assess the risk of water pollution. This misses a larger point, which is that some policies have a risk which an individual can assess as well as the state, but which only the state has the power to act on.
Take political spending and super PACs. It's easy for me as an individual to see the risk of a cash-driven election; we live in that world already. What's harder impossible for me to do is to stop it. I can't reasonably boycott every corporation that donates too much to a political campaign, and with a super PAC, I can't even learn which corporations are donating what to whom on a timely basis. Without government regulations, the corporations' right to spend its money has won over my right to have an equal voice.
Of course, "from" shouldn't always win. Nobody thinks that my freedom from annoying ads should strip companies of their freedom to advertise, and freedom to conduct business has given us many goods and leaps of innovation. It's always a balancing act.
What's interesting is that in many social matters, the prepositions don't follow party lines quite so much. Liberals worry about the right to marry whomever one wishes; conservatives worry about the freedom from having marriage tarnished; where conservatives see the right to pray in school, liberals see the right from religious pressure. I'll leave those discussions to another post.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Monday, January 30, 2012
Friday, January 22, 2010
Of axioms and bananas
Implicit in my post yesterday warning that America is at danger from a corporate takeover was that this is a bad thing; to anyone who thinks that it's a neutral or even good thing, the whole post would have read like a Michael Mooreian rant. My post was predicated largely on one prediction and one axiom: the prediction was that corporations would drown out individual humans in the public discourse, and the axiom was that humans are more important than corporations.
The problem with axioms is that they're the dead ends of arguments. You can debate a prediction or a logical connection, but an axiom is more or less the end of discussion. This is often times lethal to policy. For instance, many Americans, and particularly the GOP, have an axiomatic belief that the free market is always the best mechanism for allocating resources. Empirical evidence shows that this isn't always the case — health care is a great example — but no amount of empirical evidence can trump an axiom. That's what makes it an axiom.
The only thing you can do with an axiom is to explore its implications (as I'll do in just a bit) to see whether they really match your intuition, and to see if the axiom really deserves being one. The fewer axioms we have, the more discussion we can have (since we have fewer dead ends) — so if we can demote an axiom to a hypothesis, we should.
Back to my axiomatic belief that corporations are lesser than individuals. Some people would say this is because corporations are just an artificial construction of our legal system; but I don't buy that. Every legal entity is an artificial abstraction of a (hopefully) real thing, and corporations are real things. Banding together in groups in order to co-operate is human instinct.
But I would argue that while injustices against humans are wrong in themselves (malum in se, if I may quote Elle Woods), an injustice against a corporation is only wrong insofar as it harms humans. If a government kills someone for no reason, that's horrible in and of itself; but if a government dissolves a corporation, that's only horrible because it threatens the livelihood of its employees and their families (and because by setting that precedent, it puts at risk employees at every other business, too). I challenge the commenters to come up with an injustice against a business that is bad for reasons other than the harms it inflicts on people.
I am not at all advocating that businesses should have no rights. What I am advocating is that they have a different set of rights, and that those rights explicitly make businesses secondary to humans.
The problem with axioms is that they're the dead ends of arguments. You can debate a prediction or a logical connection, but an axiom is more or less the end of discussion. This is often times lethal to policy. For instance, many Americans, and particularly the GOP, have an axiomatic belief that the free market is always the best mechanism for allocating resources. Empirical evidence shows that this isn't always the case — health care is a great example — but no amount of empirical evidence can trump an axiom. That's what makes it an axiom.
The only thing you can do with an axiom is to explore its implications (as I'll do in just a bit) to see whether they really match your intuition, and to see if the axiom really deserves being one. The fewer axioms we have, the more discussion we can have (since we have fewer dead ends) — so if we can demote an axiom to a hypothesis, we should.
Back to my axiomatic belief that corporations are lesser than individuals. Some people would say this is because corporations are just an artificial construction of our legal system; but I don't buy that. Every legal entity is an artificial abstraction of a (hopefully) real thing, and corporations are real things. Banding together in groups in order to co-operate is human instinct.
But I would argue that while injustices against humans are wrong in themselves (malum in se, if I may quote Elle Woods), an injustice against a corporation is only wrong insofar as it harms humans. If a government kills someone for no reason, that's horrible in and of itself; but if a government dissolves a corporation, that's only horrible because it threatens the livelihood of its employees and their families (and because by setting that precedent, it puts at risk employees at every other business, too). I challenge the commenters to come up with an injustice against a business that is bad for reasons other than the harms it inflicts on people.
I am not at all advocating that businesses should have no rights. What I am advocating is that they have a different set of rights, and that those rights explicitly make businesses secondary to humans.
Sunday, November 22, 2009
The problem with unemployment is that it's too low
I've been thinking a lot about the economy the last few months — shocker, right? — and I think I have an insight as to why we have such a bubble-prone and consumeristic society.
Let me back up a second and explore the problem: what's to blame for our double-digit unemployment? Subprime loans and over-leveraged banks, sure; but if GDP is a measure of a nation's wealth, and wealth is a measure of productivity and resources, how did we lose so much of GDP without any major disasters wiping out people or natural resources? Even the Great Depression had the Dust Bowl to help it along (although that isn't what started it). But today, America has about as many able-bodied people as it did five years ago, and about as many natural resources. Our GDP should be about the same now as it was then.
I'll skip to the punchline: one reason we have so many people unemployed may be that a lot of our jobs aren't necessary. Unemployment is high because there's nothing for people to do.
And technology is to blame. It used to be that a person's job was hunting and gathering, and that job generated just enough wealth to feed his family. There were, by definition, just barely enough people to fill the open positions. I don't know of any stats from pre-Sumerian days, but I'd bet they had somewhere around 0% unemployment.
Today, only about a third of the world is involved in creating food, and it's even more drastic in the US, where about 2-3% of our jobs are agricultural. The other basic requirement for survival, shelter, doesn't provide nearly enough jobs to employ the rest of us. Residential construction employs about 1 million people in America, or around 0.3% of the population. In short, technological advances have enabled a minority of the world's population (including just 3% of America's) to supply us with the bare necessities of survival — a task that used to provide full-time employment for everyone.
The rest of us need jobs, though, and that's where consumerism kicks in. We make stuff that we don't really need and sell it to one another, because otherwise two thirds of the world (and 97% of America) would be out of a job. All of these jobs are predicated on the assumption that I can sell you something superfluous, because you have lots of money to spare, because you just sold someone else something superfluous, ad infinitum.
If I suddenly suspect that you won't buy something, then I have to lower my production, meaning I have less money to buy something from someone else, who was going to use that money to buy something from you so that you could buy from me. The same 97% of American GDP that was previously functioning without a raison d'être now shuts down for the same non-reason, which is the state we're in now. Indeed, if you look at the states that were hit least by this recession, they tend to be the ones that farm most; that is, the ones that produce something we actually need.
What's the solution? Going back to sustenance farming is obviously impossible, but a friend to whom I once mentioned this theory suggested replacing the consumeristic bubble with a more useful one, like finding ways to address global warming. The socialist in me wants to first redistribute our excess wealth, so that everyone gets to eat before the richest (by which I include even middle America) gets a new PS3 or yacht. Whatever route we go, it'll be both egalitarian and economically stabilizing to shift our production toward artificially-amplified needs rather than artificially-amplified trinkets.
Let me back up a second and explore the problem: what's to blame for our double-digit unemployment? Subprime loans and over-leveraged banks, sure; but if GDP is a measure of a nation's wealth, and wealth is a measure of productivity and resources, how did we lose so much of GDP without any major disasters wiping out people or natural resources? Even the Great Depression had the Dust Bowl to help it along (although that isn't what started it). But today, America has about as many able-bodied people as it did five years ago, and about as many natural resources. Our GDP should be about the same now as it was then.
I'll skip to the punchline: one reason we have so many people unemployed may be that a lot of our jobs aren't necessary. Unemployment is high because there's nothing for people to do.
And technology is to blame. It used to be that a person's job was hunting and gathering, and that job generated just enough wealth to feed his family. There were, by definition, just barely enough people to fill the open positions. I don't know of any stats from pre-Sumerian days, but I'd bet they had somewhere around 0% unemployment.
Today, only about a third of the world is involved in creating food, and it's even more drastic in the US, where about 2-3% of our jobs are agricultural. The other basic requirement for survival, shelter, doesn't provide nearly enough jobs to employ the rest of us. Residential construction employs about 1 million people in America, or around 0.3% of the population. In short, technological advances have enabled a minority of the world's population (including just 3% of America's) to supply us with the bare necessities of survival — a task that used to provide full-time employment for everyone.
The rest of us need jobs, though, and that's where consumerism kicks in. We make stuff that we don't really need and sell it to one another, because otherwise two thirds of the world (and 97% of America) would be out of a job. All of these jobs are predicated on the assumption that I can sell you something superfluous, because you have lots of money to spare, because you just sold someone else something superfluous, ad infinitum.
If I suddenly suspect that you won't buy something, then I have to lower my production, meaning I have less money to buy something from someone else, who was going to use that money to buy something from you so that you could buy from me. The same 97% of American GDP that was previously functioning without a raison d'être now shuts down for the same non-reason, which is the state we're in now. Indeed, if you look at the states that were hit least by this recession, they tend to be the ones that farm most; that is, the ones that produce something we actually need.
What's the solution? Going back to sustenance farming is obviously impossible, but a friend to whom I once mentioned this theory suggested replacing the consumeristic bubble with a more useful one, like finding ways to address global warming. The socialist in me wants to first redistribute our excess wealth, so that everyone gets to eat before the richest (by which I include even middle America) gets a new PS3 or yacht. Whatever route we go, it'll be both egalitarian and economically stabilizing to shift our production toward artificially-amplified needs rather than artificially-amplified trinkets.
Monday, September 28, 2009
Wherefore art thou, free market?
Our Elder Statesman rightly asked last week what government is good for (absolutely nothing! uhn-huh!), if not to provide the basics to those who can't provide for themselves. I think it's worth questioning not just the government's role in our society, but the free market's, too. Just as the government can't solve all our problems, neither can capitalism.
The mainstream position in America is that the free market is always the most efficient way to allocate resources, if not the most egalitarian — the latter point being where most people bring the government into the picture. This is true in most sectors, but not all.
Environmental policy is a good illustration of the free market's shortcomings. Pollution affects everybody, but the burden of reducing it falls solely on each polluter; nor are all of its affects financial, which makes it hard to factor them into ROI. The end result is that early adopters essentially subsidize everyone else's gains, and they get few benefits for their troubles. Everyone has a disincentive to be first in line, and little gets done; this is the exact opposite of standard free market conditions, where the race to be first is what spurs innovation. In areas where games of chicken threaten to leave everyone bleeding by the side of the road, the government is in a unique position to unilaterally devise a solution.
With health care, the problem isn't that people try to avoid being the first to get treatment; instead, it's that one of the fundamental assumptions of capitalist theory, that of the rational actor, doesn't apply. When people buy a car, they're more or less rational: advertising blitzes aside, they know what they want and what they're willing to pay for it. That BMW might roar somethin' pretty, but if it's not worth the money, I might get a Civic instead. And if my car is making weird sounds, I can put off fixing it if I don't have the money now; it might cost me more later if the car breaks down completely, but that's a risk I might be willing to take. When people learn that they might die in two years, on the other hand, they'll demand any and every treatment that might help. That 1% chance is everything when the alternative is death.
But it's a cold, hard fact is that people get sick, they get injured, and they die. The other cold fact is that we can't expend infinite resources on health care. Somebody needs to allocate — okay, I'll say it: ration — our resources. Right now, our system of rationing is the free market, a system built on assumptions that just don't apply. That's not the only reason the US spends so much money on health care and has so little to show for it, but it's part of the reason.
I can't say with certainty if government involvement is the best way to solve this rationing problem. But it's a way that other countries have shown works better than our attempt to force health care into the free market.
The mainstream position in America is that the free market is always the most efficient way to allocate resources, if not the most egalitarian — the latter point being where most people bring the government into the picture. This is true in most sectors, but not all.
Environmental policy is a good illustration of the free market's shortcomings. Pollution affects everybody, but the burden of reducing it falls solely on each polluter; nor are all of its affects financial, which makes it hard to factor them into ROI. The end result is that early adopters essentially subsidize everyone else's gains, and they get few benefits for their troubles. Everyone has a disincentive to be first in line, and little gets done; this is the exact opposite of standard free market conditions, where the race to be first is what spurs innovation. In areas where games of chicken threaten to leave everyone bleeding by the side of the road, the government is in a unique position to unilaterally devise a solution.
With health care, the problem isn't that people try to avoid being the first to get treatment; instead, it's that one of the fundamental assumptions of capitalist theory, that of the rational actor, doesn't apply. When people buy a car, they're more or less rational: advertising blitzes aside, they know what they want and what they're willing to pay for it. That BMW might roar somethin' pretty, but if it's not worth the money, I might get a Civic instead. And if my car is making weird sounds, I can put off fixing it if I don't have the money now; it might cost me more later if the car breaks down completely, but that's a risk I might be willing to take. When people learn that they might die in two years, on the other hand, they'll demand any and every treatment that might help. That 1% chance is everything when the alternative is death.
But it's a cold, hard fact is that people get sick, they get injured, and they die. The other cold fact is that we can't expend infinite resources on health care. Somebody needs to allocate — okay, I'll say it: ration — our resources. Right now, our system of rationing is the free market, a system built on assumptions that just don't apply. That's not the only reason the US spends so much money on health care and has so little to show for it, but it's part of the reason.
I can't say with certainty if government involvement is the best way to solve this rationing problem. But it's a way that other countries have shown works better than our attempt to force health care into the free market.
Friday, September 25, 2009
Binding badly behaving banks
At the G20 summit today, leaders from around the world will loudly promise to reform banking in ways they know will never be implemented. Sounds fun to me. I think I'll give it a whirl.
The biggest problem with regulations is that they always leave loopholes. Wall Street may be reckless, but it's also clever, and governments will always lag behind. That's practically by definition, really: nobody notices a loophole until after it's exploited.
In programming, there are two basic approaches to security — that is, to closing off loopholes. The first approach, called blacklisting, is to figure out all of the ways a hacker can sneak into your program, and block them. This is analogous to the government's approach, and it suffers the same disadvantages: you're always playing catch-up.
The second approach, whitelisting, takes the opposite approach: define only the inputs you want to accept, and block the rest. This concept is important enough that one of the Web's early languages has it built in, and more modern languages have add-ons that mimic or extend this behavior.
And that's my proposal for regulating the banking industry: instead of defining the thousands of things that banks, credit card companies, investment banks and the like can't do, define the few things they can do. Not only will there be fewer loopholes, but nearly all of those loopholes will be traceable back to the members of Congress who consciously and explicitly wrote them into law.
Granted, this would put a big damper on fiscal innovation. Is that a bad thing? Banking isn't exactly a new industry; at this point, "innovations" are more likely to be smoke and mirrors than real, fundamental improvements. And if someone does think of a brand new, useful way of doing things, they can petition Congress to allow it. Given the financial industry's power to take down the world's economies, I don't think that's an unjustified burden.
The biggest problem with regulations is that they always leave loopholes. Wall Street may be reckless, but it's also clever, and governments will always lag behind. That's practically by definition, really: nobody notices a loophole until after it's exploited.
In programming, there are two basic approaches to security — that is, to closing off loopholes. The first approach, called blacklisting, is to figure out all of the ways a hacker can sneak into your program, and block them. This is analogous to the government's approach, and it suffers the same disadvantages: you're always playing catch-up.
The second approach, whitelisting, takes the opposite approach: define only the inputs you want to accept, and block the rest. This concept is important enough that one of the Web's early languages has it built in, and more modern languages have add-ons that mimic or extend this behavior.
And that's my proposal for regulating the banking industry: instead of defining the thousands of things that banks, credit card companies, investment banks and the like can't do, define the few things they can do. Not only will there be fewer loopholes, but nearly all of those loopholes will be traceable back to the members of Congress who consciously and explicitly wrote them into law.
Granted, this would put a big damper on fiscal innovation. Is that a bad thing? Banking isn't exactly a new industry; at this point, "innovations" are more likely to be smoke and mirrors than real, fundamental improvements. And if someone does think of a brand new, useful way of doing things, they can petition Congress to allow it. Given the financial industry's power to take down the world's economies, I don't think that's an unjustified burden.
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